1. Health and Accident Insurance review

Health and Accident Insurance

Uses of Health Insurance

• Definition: Health insurance provides protection against the financial consequences of illness, accidents, injury, and disability.

• Covered Perils: Primarily accident and sickness.

Categories of Health Coverage

1. Medical Expense Insurance

   • Reimburses insured for medical care costs (e.g., Medicare supplement insurance, long-term care insurance).

2. Disability Income Insurance

   • Replaces lost wages due to disability.

3. Accidental Death and Dismemberment Insurance (AD&D)

   • Provides a lump-sum benefit for accidental death or dismemberment.

4. Interim Coverage

   • Short-term policies for gaps between jobs or new policies.

Health Insurance Premiums

• Annual payments with potential periodic increases.

• Calculated based on factors like interest, expenses, benefits types, and morbidity.

• Benefits depend on the amount of loss, not fixed.

Subrogation

• Insurer's right to recover losses from a third party responsible for damages (e.g., suing an at-fault driver after an accident).

Business Needs for Health Insurance

Categories of Business Uses

1. Business Continuation Plans

   • Ensures operations continue during a key employee's disability.

2. Employee Benefit Plans

   • Support employees affected by a disabling sickness or injury.

Business Continuation Plans

• Business Overhead Expense Insurance

  • Reimburses overhead expenses for disabled business owners to maintain operations.

  • Premiums are tax-deductible, but benefits are taxable.

• Disability Buy-Sell Plan

  • Facilitates selling a disabled owner's stake in the business.

  • May include a lump-sum payment and is structured as a binding arrangement.

• Key Person Disability Insurance

  • Provides monthly benefits to cover costs for a vital employee's replacement during disability.

Employee Benefit Plans

• Definition: Include health insurance and other benefits (life insurance, vacation pay, etc.).

• Employer Benefits:

  • Enhances employee morale and productivity.

  • Helps attract and retain employees while potentially reducing wage demands.

  • Provides tax deductions for employer contributions.

Nature of Group Health Insurance

• Contractual Structure: Between the insurer and the group (often the employer).

• Master Contracts: Employers hold master policies and pay premiums; employees receive certificates outlining their benefits.

• Advantages of Group Plans:

  • More extensive benefits than individual plans.

  • Higher maximums and lower deductibles.

• Coverage typically predefined in conjunction with benefit schedules.

Enrollment Periods

• Probationary Period: New employees must serve time before being eligible for group health insurance.

• Enrollment Period: Limited time for members to sign up for the group plan.

Coordination of Benefits

• Purpose: Avoid duplicate payments when covered under multiple group health plans.

• Establishes primary and secondary carriers for claim payments to ensure costs do not exceed allowable medical expenses.

• Particularly relevant for couples or workers with Medicare coverage.

Funding of Group Insurance

• Group insurance has lower out-of-pocket costs due to shared administrative expenses.

• Contributory vs. Noncontributory Plans:

  • Noncontributory: Employer pays all premiums, requiring full member participation.

  • Contributory: Employees share premium costs, with less than 100% participation required.

Group Health Premium Determinants

• Factors include group size, claims experience, and member ages.

• Options for employers:

  • Shared Funding Arrangement

  • Minimum Premium Arrangement

  • Retrospective Premium Arrangement

  • Self-Funding Arrangement

Underwriting Group Insurance

• Objective: Evaluate the group's overall risk to mitigate adverse selection. Recognizes stable, persistent groups as lower risks.

• Evaluates reasons for the group's existence, stability, and claims history before acceptance.

Preexisting Conditions and HIPAA Requirements

• Under HIPAA, exclusions for preexisting conditions are limited to those treated in the last six months, with a maximum exclusion of 12 months.

• Individuals can transfer health plans without gaps exceeding 63 days.

HIPAA Protections

• Portability: Allows continuous coverage when changing jobs.

• Conversion Privilege: Enables conversion of group policies to individual plans post-employment, independent of insurability.

• Privacy Rule: Protects individual health information, requiring notices of information practices every three years.

COBRA Continuation of Benefits

• Guarantees continuation of group coverage for terminated employees (barring gross misconduct).

• Coverage Duration: 18 months post-termination, may extend for disabilities.

• Employees can convert group coverage to individual policies upon expiration.

Pregnancy Discrimination Act

• Prohibits discrimination based on pregnancy, requiring equal treatment in group plans.

Group Health Insurance Coverages

• Group plans include basic medical expense, major medical coverages, dental and vision care, along with various supplement plans.

• Ensures benefits are determined based on collective agreements between the employer and insurer.

Tax Treatment of Group Health Plans

• Employer contributions are tax-deductible as ordinary business expenses.

• Employee premium contributions are generally not tax-deductible.

• Benefits received by employees under medical expense plans are not taxable.

Accidental Death and Dismemberment Insurance (AD&D)

• Provides benefits for accidental death or dismemberment, with specified lump-sum benefits based on severity.

• Policies cover lists of injuries with varying benefits based on the degree of accident severity, with pure accident coverage.

Special Coverage Types

• Limited Risk Policies: Cover specific risks with defined benefits.

• Special Risk Policies: Tailored for unique hazards not included in standard accident and health insurance.